foreigners in South Korea are trying to buy a house

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For Lonnie, a 45-year-old Canadian working as a professional English instructor in Seoul, buying his own home in the city was one of the first on his wish list.

But his plan for a dream home was turned down after local banks turned down his loan applications. Despite his tenure as a staff teacher at the Hankuk University Graduate School of Interpretation and Translation for over eight years, he was not accepted by banks.

“For the first time in nearly 18 years after I came here, I applied for a loan loan offered by Woori Bank last year to raise money to buy an affordable start-up home,” he said. “However, the bank official said that I was not eligible for a loan because my contract with HUFS was only for a year, and said that foreigners could flee if they had a contract for only one year.”

His contract is renewed annually, but he is classified as a permanent worker who is covered by government employment insurance. His annual income is approximately 80 million won (69,300 USD).

“What the bank clerk said was not written in the loan information for which I applied. I was definitely eligible for a loan given my income and credit history. I think that the main reason for the refusal was the stereotype about foreigners being more risky to lend money. “

The number of foreign residents in Asia’s fourth largest economy surpassed 2.2 million at the end of 2020. However, an increasing number of foreigners like Lonnie continue to face obstacles in obtaining large-scale loans from banks to buy a home.

In 2016, foreigners who took out housing loans from commercial banks made up about 40 percent of the roughly 100,000 non-Korean borrowers, but that figure fell to 35 percent last year, according to Korea Credit Information Services. the body charged with the preservation and protection of data.

On the other hand, the number of those who received non-mortgage loans increased from 34 to 41 percent during the specified period. But most of them were between 20 and 30 years old and had small loans of less than 10 million won, a KCIS spokesman said.

Experts believe that the risk of default and credit rating difficulties are the main reasons why local banks remain reluctant to approve lending to foreign residents as well as Koreans with foreign citizenship.

“This will vary depending on the internal rules of the bank, but in most cases, the procedures for issuing a loan for foreigners are more complicated, even if they have collateral. Citing the enormous risk of leaving the country unannounced and lack of identification information, large banks tend to avoid lending to foreign clients, ”said Cho Chul Min, a freelance loan consultant who previously worked for a commercial bank for over 15 years. …

He added that foreign citizens who obtained citizenship through marriage may also find it difficult to apply due to their lack of Korean language skills.

The banks’ position is contrary to the legal framework, which guarantees that foreign clients are not isolated in the credit market.

The current banking supervision rules stipulate that the lending rules of financial authorities, as well as their guidelines for the operation of banks, should be applied to both local residents and foreigners without discrimination, in the opinion of the Financial Services Commission, which sets the policy.

“Given that the number of foreign clients is expected to show continuous growth, local banks should intensify efforts to strengthen the credit scoring system for foreigners in order to expand credit services for them,” said Suh Jong Ho, Senior Fellow at the Korea Institute of Finance. …

“In terms of language issues, lenders may consider sending bilingual foreign consultants to their offline offices.”

Meanwhile, the rise in speculation in real estate on the part of some foreign investors in recent years has caused a negative public attitude towards the demand of foreign citizens for credit loans.

The number of transactions for the construction of buildings by foreigners last year amounted to 21,048, which is 18.5 percent more than a year earlier, which is the highest figure since January 2006. According to the Korea Real Estate Board, nearly 40 percent was for lease purchases.

Market experts expressed concerns about possible xenophobia towards ordinary foreign borrowers, for whom buying a house is a lifelong goal.

“Just like locals, foreigners have taken advantage of the vast liquidity brought about by the expansionary fiscal and monetary policy to counter the COVID-19 crisis and continued buying in the local real estate market early last year,” Seo Jin Hyun said. , head of the Korean Real Estate Society.

“However, not all of them bought the property in the hope of reselling it at a higher price in the near future. Among them, a significant number of foreigners bought apartments for living, taking as many loans as possible. “

Posted by: Choi Jae Hee (cjh@heraldcorp.com)



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